Sri Lanka Rupee, Stocks Drop After Currency Trading Band Removed

Feb. 9 (Bloomberg) -- Sri Lanka’s rupee fell the most since
November and stocks plunged after the central bank said it was
changing the way it manages the currency against the dollar.

Central Bank of Sri Lanka Governor Ajith Nivard Cabraal
said that effective from today a trading band against the dollar
would be removed. The monetary authority would now “intervene”
in the currency market through “supply and not based on price,”
he said.

The Sri Lankan rupee dropped 1 percent to 115.40 per dollar
as of 3.03 p.m. in Colombo, according to data compiled by
Bloomberg. That was the biggest decline since the currency was
devalued on Nov. 22. The benchmark Colombo All-Share Index of
stocks fell 2.3 percent.

“Although foreign investors may make a currency loss, the
almost floating of the rupee will give them more clarity on the
exchange rate in future investment decisions,” said Bimanee
Meepagala, a Colombo-based analyst at NDB Aviva Wealth
Management Ltd., the nation’s biggest non-state fund.

The move comes after calls by the International Monetary
Fund for a more flexible exchange rate. Sri Lanka devalued the
rupee by 3 percent in November to boost exports. The central
bank narrowed the currency’s trading band against the dollar on
Feb. 3 and Feb. 6 and today, prior to announcing its removal.
The monetary authority raised benchmark interest rates for the
first time since 2007 on Feb. 3 to contain credit growth and
inflation in the $50 billion economy.